In an interview with Bloomberg TV, Circle CEO Jeremy Allaire stated that the US regulatory crackdown on cryptocurrencies has been a significant factor behind the decreasing market capitalization of USD Coin (USDC). The regulatory scrutiny on USDC comes after the collapse of the FTX exchange, a banking crisis, and USDC’s depegging.
The USDC depegged in March due to the US banking crisis, which caused Circle’s $3.3 billion worth of USDC reserves to be stuck with Silicon Valley Bank, one of the three crypto-friendly banks that were shut down by regulators. Although Circle had assured its customers that it had the backing from investors to fill the gap, the news caused the market to react quickly, and USDC depegged from the US dollar.
At its peak, USDC had a market cap of $56 billion, placing it right behind Tether-issued USDT. However, since the banking crisis and USDC’s depeg, the stablecoin’s market cap has been reduced nearly by half, currently sitting at $30.7 billion.
Circle CEO Allaire has also raised concerns that the lack of regulatory clarity in the US may force crypto companies to seek opportunities overseas. With the recent passing of the Markets in Crypto-Assets Act (MiCA) by the European Parliament and the push for adoption by Hong Kong, Allaire believes that the US will be left behind.
Allaire has called for Congress to step up, stating that it is a critical moment for the US. The US Securities and Exchange Commission (SEC) led by Gary Gensler has been on an enforcement spree since the FTX collapse saga. The SEC has threatened regulatory action against multiple crypto platforms and exchanges.
During the oversight hearing on digital assets, Gensler faced pushback from policymakers, and many crypto proponents have also questioned the authority of the SEC and Gensler. The regulatory environment in the US has caused uncertainty and concern, leading to a decline in the market capitalization of USDC.
In conclusion, the regulatory crackdown on cryptocurrencies by US regulators has been a significant factor behind the decreasing market capitalization of USDC. Circle CEO Jeremy Allaire has raised concerns about the lack of regulatory clarity and the US banking system’s global reputation. The passing of the Markets in Crypto-Assets Act (MiCA) by the European Parliament and the push for adoption by Hong Kong have put the US at risk of being left behind in the crypto industry. Congress needs to step up and provide regulatory clarity for the US to remain competitive in the evolving crypto landscape.